Who is really in control of our economy? We often think of economy in terms of the nation state or even the globe. However, in reality, each individual has their own economy, and you can choose whether to participate in the national or global economy. How is this so? We have been duped into following the wider economy because, from an early age, we are taught to use interest bearing deposit accounts as the basis of our economic decisions. This may sound an exhaggeration, but if you have a false model you will produce a false answer.
Children are taught that they should invest in businesses that provide a greater return than their bank account, and this idea has become ingrained into the national psyche. For intstitutional investors, they have a similar bias, believing that government bonds are the safest, soundest, and apparently most inflation proof investment. But herein lies the problem, because once upon a time, gold was the benchmark for the safest, most inflation and recession proof investment. This is because of its limited supply, the fact that physical gold owes nobody so does not suffer from defaults, and, because its limited industrial role means that even a recession will not reduce demand for it, unlike other metals, e.g. copper prices tend to plummet during a recession as production falls, whilst gold prices will often rise as investors flee to safety.
It has recently come out in many outlets that gold prices are being manipulated, with exchanges selling more gold than they actually have. This explains how gold fell between the early 1980's and the early 1990's, but that situation appears to be rapidly unwinding now as more and more comes out about gold price manipulation and as gold prices soar to record highs. If you look at the chart above, you will see that inflation in America actually fell between 1800 and 1913. This is because America was on a gold standard. The blips are when paper money was printed to fund wars. Even during the gold rush, global gold supply only rose 2% annually because the vast majority of all gold mined the last 5,000 years remains stored as bullion, e.g. as money. That used for industry is usually recycled. Prices fall in a gold standard because, the growth in productivity will tend to exceed the growth of gold supplies in an economy. You therefore have more goods and services being chased by a similar supply of money.
In a gold based economy, gold is the benchmark for all other investments. One will only invest in a business that provides enough return to justify the additional risk. Business is therefore geared strongly towards productivity and those with savings in bullion will see their investments grow in purchasing power over time, letting them ammas capital for their own consumption or investment.
This all changed after 1913, when the Federal Reserve began printing money for government and to capitalize corporate banks. At this point, bank accounts are no longer fully backed by gold, they become accounts comprised of paper money, and instead of price deflation, we see that prices begin inflating, or, we see that the value of the currency is being debased.
The graph above shows gold prices since 1800. The Federal Reserve were queitly debasing the currency in the lead up to the Great Depression, and then officially devalued the dollar against gold two weeks after confiscating gold from its citizens. They then attempted to fix gold prices until the mid 1960's when the vast volume of new money could no longer be masked and then began the exponential rise in gold prices that continues to this day. The fall between 1980 and 1990 now appears to have been the result of price manipulation where the paper exchanges for gold appear to have been selling more gold than they actually have, but this appears to be unwinding now has people are slowly wisening up and demanding physical delivery. Some, including Bob Chapman, suggest that exchanges like COMEX are leveraged 100:1.
Returning to the lesson children get about investment, we are told to invest in businesses that provide us greater returns than our interest bearing bank accounts. However, when inflation occurs, interest rates become artificially suppressed because inflation is used to satisfy investor demand from capital. Absent this, they would bid higher for capital from banks, forcing up interest rates. Therefore, if interest rates are artificially low, our standards for investment will also drop. For example, if interest rates are at 10%, we will probably only invest in a business yielding 16%, whilst if interest rates drop artificially to 5% we may put up with investing in a business that yields just 11%.
Inflation itself is the debasement of paper currency, so it also reduces the standards of business we will invest in. For example, we may have a bank account yeilding 5% interest yet reported inflation is at 4%. This makes people less keen to save and more likely to take risks on investments. Incidentally, with less people saving, central banks are inclined to print yet more money to counteract this and capitalize corporations.
But it gets worse, because real inflation is almost always far higher than reported inflation, for a number of reasons. The first, and most obvious, is that government lie about price inflation so that they don't have to pay out as much money on pensions, state benefits and on their own bonds.
Real inflation also tends to be higher because with sound money, prices should fall. For example, if GDP is rising by 3%, prices should fall by around 3%. Therefore, if enough money is printed to bring about a real price inflation of 2%, then we are probably looking at a 5% growth in the money supply, and most of that new money will go straight to government and the corporate monopolies that the corporate banks fund.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."
In this scenario, those who keep their money in a bank may earn 3% interest, but, 2% of the real value of those savings is being stolen by government and corporations. At the same time, they may choose to invest in a business that yields 10%, but half of the real value of that profit is being stolen by government and corporations via a 5% growth in the money supply. Incidentally, the growth in the money supply during the 20th Century is similar to the growth in government and corporations, as warned by Jefferson in the quote above.
But all of those decisions are based on the false perception that interest bearing bank accounts and government bonds are the soundest possible investment. If We The People chose to use gold as the benchmark, then we would never invest in banks that return to us a small crumb of the inflation they cause. We would also not invest in businesses that yield more for governement and corporations than they do for us. So, who really is in control? I say it is We The People who are in control, and all we need do is discover the natural benchmark to investment that gold provides so that we can ignore false investments, and the banking system would collapse, leaving us with all the capital.
The misperception of using bank accounts to determine investments also affects the business cycle. It masks and delays deflation. For example, house were falling maybe 20% in some places during 2009, but we also saw money growth hit 20% in America. This was reflected in rising gold prices, but most people do not use that as a benchmark. Therefore, whilst house prices appeared to be falling 20% from those who live in a paper money world, they were infact falling 40% or more for those who use gold as a benchmark. Had the public been aware of this, they would have flooded out of real estate and prices would have collapsed earlier. If prices had already hit their free market price, construction and house price sales would re-commence, because people would once again be able to make a decent margin in the industry, but prices remain artificially high and the industry remains depressed.
In addition, house prices were rising during the 1990's, but gold often out performed them. So, whilst people were loading up on debt to buy houses and benefit from the "boom", they could have put their savings, debt free into gold without risk or any need to borrow money. A public, with gold as their point of reference, would not have participated in this illusionary inflationary boom. So the business cycle is extended by our investment assumptions, that are ingrained into us as children when teachers tell us to invest in businesses opportunities that outperform bank accounts and bonds.
To be sure, the business cycle is caused by inflation, because printed money reduces interest rates, causing businesses to believe that more savings exist than do in fact. They therefore invest in more production than the economy can sustain, producing too much of the wrong thing, resulting in a boom that collapses when interest rates finally rise and they cannot meet repayments. However, if We The People used gold as our own economic base. We would not participate in these ponzi schemes so they could not occurr to the extent that they do.
Just imagine it. If 10% of the public had their savings in gold, would the government mis-behave with inflation and hand them a doubling of gold prices? No, government would behave if we chose to save in gold, or, they would become openly tyranical and try to steal our gold and create a crisis like war to justify such a move, but this eventually would be their downfall. The inflation system would also collapse if government and corporoations were forced to behave, because debt and inflation always need more debt and inflation to keep afloat. When the big recession comes, if they cannot be bailed out, they will fall.
But essentially, the root cause of this is an immoral society. Inflation is a theft system. Theft from We The People to government and corporations. When God instructed us that "Thou Shalt Not Steal" this implied a responsibility to not aid and abeit the theft that others carry out. When we recieve interest on bank accounts, we are being given a small sliver of the loot, and whilst we are not the main benefactors, we have bought into the lie and according to natural law, we deserve what we get, because we fund the establishment's high living by trading and saving in a paper money system that they can print (steal) from thin air, because think about it. If none of us saved in paper money, government and corporations could not steal the value of our savings.
We became an immoral society when as a society we gave up the liberty to teach our own children, and we accepted that mass media and governments could teach them. Of course, they got taught what was in the interest of those doing the teaching. They taught children that interest bearing bank accounts were the soundest form of investment, and from that point on, the theft system could thrive. We are destined to repeat the boom bust cycle up until when we decide to gut up and recognize the theft that is occuring, when we educate ourself about why gold is mentioned more times than any other metal in the bible. Why is that? It is because gold, as money, is the soundest, and most honest form of money that exists. Those who hold it cannot be stolen from via inflation. Essentially, it is immoral to hold an asset class that you know is being stolen from. You are providing the theif the means to steal. This is just as bad, morally speaking, as stealing. So we suffer not only the business cycle, but also unproductive businesses because of our immorality.
And the suffering of unproductive businesses is the real suffering, because businesses only exist to serve human needs. Thus, by participating in a theft system, everybody has less. Even those at the top have less, because whilst they have their wonderful mansions, they benefit from less technology than would otherwise exist, and they have to walk through the streets of cities that are a fraction of the beauty of when we were productive and used gold as our currency, which is why now, we protect historic areas created 100yrs ago but have little love for modern buildings.
So, take away the wind from the sails of government, bankers and corporate monopolies and put your money in physical gold and silver.
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Posted 07/15/10
brettwashere
Buckhannon, WV | I'm completely for a solid currency. One pound should be an arbitrary representation of one pound's worth of natural resource (gold, beef, lumber, petroleum etc) or services (manufactury or technology)
If we were to use gold, Gresham's Law could fall into effect - where the currency would be cashed in, hoarded or exported as bullion. That would be bad for the circulation of the economy. (Sherman Silver Acceptance Act)
On the other hand, credit is more elastic and will withstand a run to the bank (Great Depression October 1929)
The problem is that lending institutions, investers and insurance claim the lion's share of the currency and supply neither resources or services of any actual kind - yet we find ourselves enslaved to these same institutions.
I think we are on the right track here - but we should find a better way than gold... any suggestions? |
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